Fiscal Accountability
The School Review and Fiscal Accountability Division (SRFA) is responsible for analyzing the financial health of Michigan’s 879 active school districts, intermediate school districts (ISDs) and public-school academies (PSAs) as defined by; Public Act 436 of 2012, the Local Financial Stability and Choice Act, Public Acts 109 to 113 of 2015, the Revised School Code and the State School Aid Act in partnership with Michigan Department of Education (MDE).
Active Vs. Inactive Oversight Process
Early Warning
The School Review and Fiscal Accountability Division has two methods at which the division can be proactive in identifying school districts or public-school academies that may be facing potential fiscal stress. Section 1219 of The Revised School Code, Public Act 451 of 1976 gives the division and district the opportunity to work collaboratively to provide technical support and additional resources to avoid future decline in fund balance (commonly referred to as the “Early Warning Process”). The Early Warning Process is the first response when declining fiscal health is identified. It is not a trigger for preliminary review under the Local Financial Stability and Choice Act, Public Act 436 of 2012, and is not presumptive evidence that a financial emergency (as defined in the Act) will be declared for a district in the future should a review under the Act be required. The Early Warning Process was developed in efforts to prevent financial emergencies.
Projection Model Identification
The School Review and Fiscal Accountability (SRFA) Division applies a financial projection model to the three most recent years of Financial Information Database (FID) data. The model incorporates four key financial indicators: enrollment, revenue, expenditure, and fund balance. The school districts, intermediate school districts, and public-school academies that are projected to incur a deficit are contacted by SRFA to determine if corrective action has occurred. Districts that have not taken SRFA-approved corrective action will be identified as having potential fiscal stress.
The projection model spreadsheet linked below contains the formula used to project fund balances. This is the first step in identifying potential fiscal stress. This spreadsheet allows districts to input financial data to produce the projection model's result.
Sample Projection Model Spreadsheet
Budget Review Identification
Another method in identifying potential fiscal stress is reviewing district and public-school academy budgets and amendments. SRFA reviews the financial transparency pages of all districts and public-school academies three times a year. Districts and public-school academies that are projecting to spend a majority of their fund balance are contacted by SRFA to determine if corrective action has occurred. Districts that have not taken SRFA-approved corrective action will be identified as having potential fiscal stress.
REMINDER: MCL 388.1618(2) requires districts to post budgets within 15 days after adopting its annual operating budget and after each subsequent revision to that budget.
Treasury Oversight
Early Warning Potential Fiscal Stress (No General Fund Deficit)
Pursuant to Public Act 109 of 2015, the School Review and Fiscal Accountability Division is responsible for providing early warning and identifying potential fiscal stress in school districts and academies. The Division will evaluate historical trends and analyze data to identify if potential fiscal stress exists. This is the first step of declining fiscal health. Early Warning Oversight includes monthly reporting of year-to-date revenue, expenditure, and cash flow.
Enhanced Deficit Elimination Plan (EDEP) (General Fund Deficit)
The next level of Treasury oversight would be if a District incurs a general fund deficit projecting to last five years or more, they are placed under Treasury oversight and thereby required to develop an approved Enhanced Deficit Elimination Plan (EDEP). An EDEP includes monthly reporting of year-to-date revenue, expenditure, and cash flow in addition to the approved deficit elimination plan.
If a District incurs a general fund deficit projecting to last less than five years, they are placed under the Department of Education oversite. Read more on the Deficit District Information on the Department of Education website.
Public Act 436 (Financial Emergency)
The next level of oversight would be if a District fails to submit or materially comply with the requirements of an EDEP or meets other potential triggers for a preliminary review.
Receivership Transition Advisory Board (RTAB) Schools
Commissions and Committees
Detroit Financial Review Commission (FRC)
The Financial Review Commission (FRC) is responsible for oversight of the City of Detroit, the School District for the City of Detroit (DPS), and the Detroit Public Schools Community District (DPSCD). It ensures both are meeting statutory requirements, reviews and approves their budgets, and establishes programs and requirements for prudent fiscal management, among other roles and responsibilities.
Community Engagement Advisory Committee
A Community Engagement Advisory Committee (CEAC) is established to facilitate the on-going exchange of information between the various community, local, and state stakeholders concerning operations, financial, budgetary and other matters that are essential to the long-term viability of the impacted school district or local government unit.